The Business of Oil and Gas

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A recent article in the Wall Street Journal reports that energy hedge funds are under pressure from institutional investors. These mainly pension funds along with college endowments face tens of billions in losses from their investment in the Exploration & Production (E&P) sector following the fall in prices. After prices plummeted at the end of 2014, private equity rushed in armed with over $60 Billion of new investor money. Another $30 Billion has gone in so far in 2016. Private equity has been successful attracting new investment since the downturn on the basis of a “contrarian” play. That is, when prices return to normal, the new money will reap a windfall. That has, so far, not been the case. Yet, is there hope for the institutions and their beneficiaries? Since the price of oil went into free fall at the end of 2014, nearly $60 Billion of market value has evaporated...
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Opportunity in an Unlikely Place

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At the turn of the last century Argentina had one of the top 10 economies in the world, number 5 to be exact. But a toxic combination of bad economic policies, made worse by incompetence and a particularly virulent form of populism led to economic disaster. As late as 2014 Argentina was involved in a lawsuit in US Federal court over its eighth default on bonds and the President, Cristina Kirchner could not travel in government planes, risking seizure of the aircraft. Bond holders even tried to seize Argentine naval vessels in an African port, and nearly succeeded. Fast forward to the present A new president elected under the banner of economic reform and things are suddenly different. An agreement with American Energy Partners and YPF, the state oil company, to develop Argentina’s shale resource was recently signed. Soon thereafter, the new President Mauricio Macri, lifted prices on retail power prices,...
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Oil and Gas Outlook

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How Do You Catch a Falling knife? The simple answer is you don’t try. That doesn’t mean that many very smart, knowledgeable people with access to the best information about the danger of knives and Newton’s law of gravity don’t try, with the expected consequences. Yet, there could be some very good reasons to catch the knife: Prevent some serious damage when it hits, Gain possession of a very valuable asset, Capture a competitive advantage over the “knifeless”. Oil and Gas Hedge Funds Forge Ahead According to Market Realist over $1 Trillion of upstream market capitalization has been erased due to falling prices. About $14 Trillion flowed into oil and gas exchange traded funds in the past 18 months. That does not include direct investment, primarily by the smartest of the smart, the hedge funds. The financial press is replete with disaster stories, most notably KKR’s worsening loss in Samson Resources...
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Bill Peyto-Warden, Banff National Park
Introduction This case study is part of a continuing series prepared by Pangea Global in its ongoing research project on the business of oil and gas. The project examines the three key business dimensions of performance, People, Strategy and Business Processes for the North American exploration and production industry segment. The case study series illustrates specific sources of high performance within those three dimensions unique to each company. These case studies are used to help companies seeking to improve their performance by illustrating how high performing companies have found their way to success. The case studies are developed from public documents with requested clarification from the companies. As such, proprietary information is never collected and respect for full disclosure is strictly adhered to. Summary Peyto has achieved remarkable success in the challenging tight gas reservoirs in the deep Western Canadian Sedimentary Basin (WCSB). With only 50 people, the company has earned...
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What Should Exxon Do?

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If I were advising Exxon-Mobil’s next CEO what would I recommend? This is a purely hypothetical question as I am not waiting for the phone to ring. Rather, the intent is to illustrate one view of how a radically new industry structure could unfold. The bottom line is that Exxon should become a technology company. The Wall Street Journal reported this morning that Darren Woods was named President effective January 1. Similar moves preceded the elevation of past Exxon CEO’s including Lee Raymond and incumbent Rex Tillerson, suggesting Mr. Woods will become CEO upon Mr. Tillerson’s retirement, no later than 2017. The next CEO will have to steer the company in a time of chronically low oil prices. In my view, this presents both the obvious challenge and perhaps new opportunities. Exxon among all the International Oil Companies (IOC) has options to play the game in new and perhaps more...
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